Here's Why We Think NCC (NSE:NCC) Might Deserve Your Attention Today

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like NCC (NSE:NCC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide NCC with the means to add long-term value to shareholders.

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How Fast Is NCC Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Shareholders will be happy to know that NCC's EPS has grown 30% each year, compound, over three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be beaming.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. EBIT margins for NCC remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 17% to ₹226b. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. For finer detail, click on the image.

See our latest analysis for NCC

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of NCC's forecast profits ?

Are NCC Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The good news is that NCC insiders spent a whopping ₹70m on stock in just one year, without so much as a single sale. Buying like that is a fantastic look for the company and should rouse the market in anticipation for the future. We also note that it was the company insider, Uddaraju Ramya, who made the biggest single acquisition, paying ₹28m for shares at about ₹283 each.

Along with the insider buying, another encouraging sign for NCC is that insiders, as a group, have a considerable shareholding. We note that their impressive stake in the company is worth ₹25b. That equates to 20% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Should You Add NCC To Your Watchlist?

If you believe that share price follows earnings per share you should definitely be delving further into NCC's strong EPS growth. Furthermore, company insiders have been adding to their significant stake in the company. These things considered, this is one stock worth watching. However, before you get too excited we've discovered 1 warning sign for NCC that you should be aware of.

Keen growth investors love to see insider activity. Thankfully, NCC isn't the only one. You can see a a curated list of Indian companies which have exhibited consistent growth accompanied by high insider ownership.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.